Correlation Between Shenzhen Clou and Longjian Road
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By analyzing existing cross correlation between Shenzhen Clou Electronics and Longjian Road Bridge, you can compare the effects of market volatilities on Shenzhen Clou and Longjian Road and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shenzhen Clou with a short position of Longjian Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Clou and Longjian Road.
Diversification Opportunities for Shenzhen Clou and Longjian Road
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shenzhen and Longjian is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Clou Electronics and Longjian Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longjian Road Bridge and Shenzhen Clou is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shenzhen Clou Electronics are associated (or correlated) with Longjian Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longjian Road Bridge has no effect on the direction of Shenzhen Clou i.e., Shenzhen Clou and Longjian Road go up and down completely randomly.
Pair Corralation between Shenzhen Clou and Longjian Road
Assuming the 90 days trading horizon Shenzhen Clou Electronics is expected to under-perform the Longjian Road. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Clou Electronics is 1.13 times less risky than Longjian Road. The stock trades about -0.06 of its potential returns per unit of risk. The Longjian Road Bridge is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 412.00 in Longjian Road Bridge on November 9, 2024 and sell it today you would lose (40.00) from holding Longjian Road Bridge or give up 9.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shenzhen Clou Electronics vs. Longjian Road Bridge
Performance |
| Timeline |
| Shenzhen Clou Electronics |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Longjian Road Bridge |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Shenzhen Clou and Longjian Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shenzhen Clou and Longjian Road
The main advantage of trading using opposite Shenzhen Clou and Longjian Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Clou position performs unexpectedly, Longjian Road can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Longjian Road will offset losses from the drop in Longjian Road's long position.The idea behind Shenzhen Clou Electronics and Longjian Road Bridge pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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